Accelerating local investments

The market again closed lower last week, which was largely influenced by the negative reaction to the US Fed rate hike and continuing net foreign selling.

The benchmark Philippine Stock Exchange index (PSEi) ended the week at 6,850.71 for a total loss of 192.45 points or 2.73 percent, while the broader All Shares also declined with a weekly loss of 69.97 points or 1.65 percent as it settled at 4,159.42.

With Friday’s close, the PSEi is already 101.37 points or 1.46 percent below its beginning level for the year. This meant that the potential profits all investments held since the beginning of the year may now be practically wiped out.

To recall, the US Federal Open Market Committee (FOMC) on Thursday morning (Philippine time) decided to raise by 25 basis points the key federal funds rate to the 0.5 to 0.75-percent range. The FOMC also made hints it would make more rate increases next year.

Foreign investors were likewise blamed for dragging the market lower on account of their net selling activities as they practically controlled 62.86 percent of total market transactions for the week. Data showed their buying volume amounted to $21.5 billion only while their selling volume amounted to $25.81 billion for a total net selling of $4.35 billion.

Daily value turnover also dropped to P7.52 billion. Without an equivalent meaningful volume per trade that indicates that trading is switching to big ticket stocks or market leaders, Friday’s performance was seen so weak to cause any positive impact on the market.

Last week, too, the World Bank upgraded its economic outlook for the country, on account of the high confidence seen among investors and consumers and the government’s commitment to increase public infrastructure spending.

Similar to the government’s forecast, the World Bank revised its projection to 6.8 percent for 2016 compared to its estimate of 6.4 percent announced last October. It noted the country’s gross domestic product (GDP) grew faster than expected in the third quarter at 7.1 percent, driven by accelerating investments and private consumption growth.

The World Bank also raised its growth projections for the Philippine economy for 2017 to 6.9 percent from its previous forecast of 6.2 percent, and set its growth projection for 2018 at 7 percent. In comparison, the government has set a growth target of 6.5 percent to 7.5 percent for 2017, and 7 percent to 8 percent for 2018 and beyond.

The National Economic and Development Authority (Neda) also expressed confidence the country’s fourth quarter GDP may likely settle close to 7 percent, with public spending, exports, and public consumption spurring growth.

Bottom line spin

BDO Unibank is set to raise P60 billion in fresh funds in January next year via a stock rights offering consisting of 800 million shares. The final price will be revealed on Jan. 3. The offer period is expected to run from Jan. 16 to 24. Listing is to be held on Jan. 31.

The proceeds from the stock rights offer will fund BDO’s lending business, as it seeks to sustain its momentum and take advantage of the country’s growth opportunities. It is also “to provide a comfortable buffer over higher capital requirements with the forthcoming imposition of the Domestic Systemically Important Bank (DSIB) surcharge.”

SM Investments Corp. (SMIC) will subscribe to P25 billion of the P60 billion stock rights offering. According to SMIC, this will be the conglomerate’s contribution to the government’s accelerated infrastructure spending, programmed at 5.4 percent of GDP next year. The government’s spending program is expected to increase further to 7.2 percent of the GDP by 2022.

Additionally, the Securities and Exchange Commission (SEC) has given BDO Leasing and Finance, Inc. to raise funds via a debt paper issuance. Approved were P15 billion and P10 billion worth of commercial papers of BDO Leasing and P960 million commercial papers of CityLand.
BDO Leasing’s two issuances will be used to repay short-term commercial papers, short- and long-term promissory notes, as well as for re-lending, while CityLand’s will be used to fund the construction of its Alabang Premier and for the repayment of maturing loans and notes.
The commercial papers were said to have good ratings, indicating the high quality and very low credit risk of their securities, owing to their strong capacity to meet their financial obligations.